If you’ve ever argued with your credit card company about anything (and a lot of us have), then you probably know there are a great deal of fine print and hoops to jump through when it comes to credit cards. It doesn’t matter if you’re a seasoned, habitual swiper, or you’re brand new to the credit card game.
There are things some may not know about those little magnetically-enhanced pieces of plastic that sit in our wallets, and credit card companies will do anything to sign you up. Here is some advice directly from the experts on what you should know before you swipe your card again.
1. A late payment could cost you big bucks
You may already know that a late charge on your credit card can be as high as $75, depending on the company. But did you know that a late payment can also raise your interest rate? The highest interest rate allowed by law varies from state to state, but some tardy payment makers could see an increase in their interest rate to as high as 30%. Ouch.
2. Everything is negotiable
Credit card companies like to keep their losses at a minimum. That means that they may be more willing to work with you to get your business, or even settle with you if you owe a large amount of money. Don’t like something your credit card company is doing, like charging you too much interest? Call them and ask them to change it. While they may not be able to give you what you’re asking for, you may at least reach some middle ground with them.
3. Annual fee? You can ask to convert
Some credit card companies have a variety of offerings to entice more potential clients. If you currently have a card with an annual fee, and you don’t use it much or don’t feel the annual fee is worth the perks (they usually aren’t) then simply call your credit card company and ask them to convert the card to one with no annual fee. If they offer one, they may be able to help with this.
4. You can up your credit game to unlock the best rewards
It might seem obvious, but the best perks, such as great cash back incentives, travel rewards, and no interest, are reserved for those with the highest credit scores. If you aren’t getting the kind of rewards you want, do your best to raise your credit score as much as possible.
5. Introductory periods don’t last forever
It’s so tempting to open a credit card that promises no interest for over a year, isn’t it? Whether it’s to buy a new couch or a vacation to your dream destination, it seems reasonable to take advantage of an interest-free period. However, if you don’t pay off your purchase within this period, you’ll be charged with interest dating back to your date of purchase.
6. Grace periods aren’t that graceful
Making a late payment should be avoided at all costs, especially when it comes to “no interest” situations. Paying off a balance in full just a couple of days late will still result in interest being charged all the way back to the date of purchase. So if you buy a new TV on a credit card that promises no interest for 18 months, and it takes you all 18 months to pay it back, make sure you make that last payment on time, or else you could be looking at 18 months worth of interest.
7. Fixed interest has some strings attached
Like a fixed mortgage where the interest rate stays the same for the life of your loan, most of us would assume a fixed interest credit card would mean you get the same interest rate for the entire time you have the credit card. However, make sure you read the fine print in your credit card agreement. Most “fixed interest” credit cards have an end date, after which the interest can and will change.
8. Minimum payments won’t help you in the long run
It’s simple math, really: making the minimum payments on any running credit card balance will cost you much more than you ever intended to pay. No one would willingly pay $50 in interest on a steak dinner, would they? Pay off your balances as quickly as possible, and avoid carrying large balances on any credit cards. You’ll save yourself a lot of money in the long run.
9. No-limit credit cards are still limited
While you may have signed up for a credit card thinking there was no limit, and suddenly charged up thousands of dollars, you might be penalized. That’s because a true no-limit credit card doesn’t really exist. Rather, the limit is based on your spending habits.
See: Don’t ever do this with your credit card
10. Fees pay for interchange
Why do credit cards have so many fees? Well, every time you swipe your card, it sets off a chain of events behind the scenes within mere seconds. “Processing” is a pretty general term, but in this case, that’s what your fees are paying for. Third parties (and sometimes fourth and fifth ones) get involved with processing your transactions, and they make money off them. The system of interchange is a complex one, but it’s one of the negatives that comes with being a credit card holder.
11. A 45-day increased APR notice isn’t really 45 days
Credit card companies used to be able to raise a borrower’s interest rate with no warning. Not even so much as a phone call. However, that all changed in 2009, when a bill was passed forcing credit card companies to give you 45 days’ notice before raising your interest rate. However, it usually comes in the form of a letter, and you have to begin paying the interest 45 days from the postmark date, but the interest begins accruing only 14 days after the postmark date.
12. Making two payments a month reduces your interest
Most people aren’t making monthly payments because it’s fun, but because their financial situation dictates it. However, if you can afford to make two credit card payments a month, you’ll save yourself money on interest.
13. If you’re paying high interest, you’re not alone
Some have credit cards accruing as much as 30% interest, and the national average was 16.15% in Nov. 2017, according to a creditcards.com survey. The best way to lower your interest is to pay off your balance, make all payments on time, then call your credit card company and ask them to lower it. It’s likely they will.
Read: For consumers with credit card debt, Fed rate hike will sting
14. Cash advances are paid last
When you make a payment, how do you know exactly which purchase is being paid for? You don’t, and that’s the problem. You can’t control what gets paid first or last. Cash advances are paid off last, and usually carry a higher interest rate. If you need to take a cash advance from your credit card, you’d be better off using one that has no balance.
15. Credit cards can be used responsibly
Despite evidence to the contrary, credit cards aren’t actually all that bad. When used responsibly, they can help boost your credit, allow you to travel to places you wouldn’t have been able to afford otherwise, and help you get to a better financial position. Just be careful with your spending and always, always pay your bill on time.